On Friday, Jefferies initiated coverage on Go Digit General Insurance (GODIGIT:IN) stock, assigning a Buy rating and setting a price target of INR420.00. The firm highlighted the company's agility in the motor segment, which has resulted in superior underwriting outcomes and strong growth.
Go Digit has achieved a net incurred claims (NIC (NASDAQ:EGOV)) ratio of 62% and a gross direct premium income (GDPI) compound annual growth rate (CAGR) of 41% from fiscal year 2021 to 2024.
Jefferies expects that as Go Digit's growth moderates to a projected 21% CAGR over fiscal years 2024 to 2027, product diversification and operating leverage will improve the combined operating ratio (COR) to 103% from the current 109%. This enhancement is anticipated to be a key factor in the company's financial performance.
The firm forecasts an earnings per share (EPS) CAGR of approximately 73% and an expansion in return on equity (ROE) to around 16%. These metrics are seen as indicators of Go Digit's financial health and potential for investor returns. The improvement in COR, coupled with sustained EPS and ROE momentum, is expected to extend beyond fiscal year 2027, according to Jefferies.
In their coverage initiation, Jefferies underscored the potential for Go Digit's stock, with the price target implying a price-to-earnings (P/E) ratio of 48 times the estimated earnings for September 2026. This valuation reflects the firm's confidence in Go Digit's ability to maintain its growth trajectory and profitability in the coming years.
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